Reed Smith Client Alerts

In response to the evolving challenges facing the shipping industry in 2019, BIMCO has released new standard sanctions clauses for time and voyage charter parties. The release attempts to respond, in particular, to the United States’ more aggressive sanctions regimes for Iran and Venezuela, which have strained the previous BIMCO language. BIMCO states that the updates are designed to address the high risk of violation, incidental to the “complex, imprecisely drafted, often changing” sanctions rules. 

Authors: Leigh T. Hansson Alexander Brandt Claire E. Don William Young

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BIMCO Sanctions Clause for Time Charter Parties 2020

The new time charter party clause is intended to replace BIMCO’s previous Sanctions Clause for Time Charter Parties 2010 and the Designated Entities Clause for Charter Parties 2013.

The principal features of the new clause are:

  1. Definitions of “Sanctioned Activity,” “Sanctioning Authority” and “Sanctioned Party” which BIMCO states provide an “objective test.”
  2. The inclusion of warranties from owners and charterers with the effect that, at the date of the charter party and throughout the duration of the charter, neither they nor their contractual counterparties are deemed to be Sanctioned Parties. For owners, this includes the vessel’s registered owners, bareboat charterers, intermediate disponent owners, managers, the vessel and any substitute. For charterers, the warranty extends to any sub-charterers, shippers, receivers and cargo interests.
  3. An express right of termination for owners and charterers in the event the other party breaches those warranties.
  4. An express obligation on charterers not to issue orders which involve a Sanctioned Party or Sanctioned Activity. This replaces the wording in the 2010 clause whereby owners were not obliged to comply with orders which, in their reasonable judgment, would expose vessel interests to sanctions.
  5. A right for owners to refuse to proceed with employment, and a requirement for charterers to issue alternative voyage orders within 48 hours, if during the performance of a voyage a party or activity becomes sanctioned, failing which owners may discharge any cargo loaded at any safe port or place. The vessel is to remain on hire throughout with charterers responsible for all costs and expenses.

BIMCO Sanctions Clause for Voyage Charter Parties 2020

This is BIMCO’s first sanctions clause for voyage charter parties. It largely shares the same key features as the time charter clause.

  1. It contains the same definitions and warranties as those included in the Sanctions Clause for Time Charter Parties 2020, as well as the related rights of termination.
  2. If performance of the charter party involves a Sanctioned Party or Sanctioned Activity, without prejudice to the right of termination, owners may cancel the charter party if loading has not commenced. If loading has commenced, owners have similar rights to demand alternative voyage orders.